The power plant is a series of gigantic, skyscraper-like cylindrical towers in a complex not far from 01. As the name suggests, the power plant generates electrical energy for 01's inhabitants, the Machines.
Each cylindrical tower contains thousands upon thousands of pods. Inside each pod is a human, connected through a series of grafts, plugs and wires into the circuitry of the pod. The human's mind exists in a living dream--a neural-interactive virtual world known as the Matrix, fully convinced in almost all cases that they are alive, awake, and living at a time on Earth near the end of the 20th Century.
Meanwhile, each pod generates heat energy that, collectively, is used by the Machines (in combination with a form of nuclear fusion) to power 01.
Each pod is tended to by a docbot, a Machine entity that ensures each human stays asleep and working properly.
Each pod is connected to a waste chute. Many human bodies that have died are recycled into a gelatinous nutrient that is fed back to other pods. In the case of some bodies, the docbot may be commanded to eject a human from the pod, where the body falls into the remains of the ancient sewers, conduits and other tunnels from the old human megacities which crisscross the surface of the Earth.
According to early scripts from The Matrix, the minds of the pod-humans are also combined as a form of biocomputing cluster. Each human mind within the Matrix is also a subprocessor for the virtual world. This information correlates to the detrimental effects of Smith, a rogue agent that infects both programs and bluepills alike to form copies of himself. Smith's viral behavior greatly disrupts the Matrix and the minds the form it, leaving it in a imminent computer crash before Neo stops Smith so that the Matrix can be reloaded.